Baires and I tossed some thoughts back and forth that may be of interest to this community and may foster some additional discussion that may help all of us here

I wondered to Baires about these weak hands, who are selling Tyhee shares at these levels. It made (and continues to make) no sense to me from a fundamentals perspective.

So, what am I seeing from a fundamentals perspective?

First, investors are going down Exter's pyramid in search of liquid assets. Gold and the USD are the the most liquid assets, and are increasingly moving in the same direction. This is posing a conundrum for Joe Six-Packs and the mainstream media because conventional wisdom holds that gold and the USD are oppositely correlated. Gold has already broken out against other currencies. It's only a matter of time, gold breaks out against the USD. Such a breakout need not require a collapse in the USD(, although that may happen in due course as an element of the financial repression required to lower national debt-to-GDP levels to sustainable levels).

Second, there are more and more physical gold trading platforms on-line and are expected to come on-line shortly. Examples of such platforms include those in Shanghai, Singapore, and Dubai. As to the Shanghai Gold Exchange, China plans to launch a yuan-denominated gold fix later this year. The gold fix will be set thorugh trading of a 1kg contract on the Shanghai Gold Exchange. These physical gold trading platforms are important because they will open up arbitrage between paper gold exchanges and physical gold exchanges. In other words, traders will buy cheap contracts on a paper gold exchange and sell more expensive contracts on a physical gold exchange. Such arbitrage will cause the price of paper gold to increase toward the price of physical gold. As the price of paper gold goes up, naked shorters will get overrun, unable to deliver on their contracts.

There's another interesting thing about these physical gold trading platforms. Gold producers are incentivized to sell physical gold directly to the exchanges, bypassing the bullion banks.

Third, as more and more juniors run out of money and as financing dries up, exploration is drying up. Majors are eating through their resources and need to to replenish them. Juniors will get bought (perhaps out of bankruptcy) or juniors will make a killing if they can line up financing. As I may have mentioned in a prior post, timing is critical. A junior that doesn't get financing goes bankrupt. A junior that get financing well before the next leg up in the gold bull market risks eating through its resource base at artificially low gold price levels.

Baires and I hope that these thoughts encourage some discussion from which we can all learn.

Going back to lurker mode, but still keeping the faith,

Old School